RISK DISCLOSURE STATEMENT

Transcription

1 RISK DISCLOSURE STATEMENT 1. Trading in margined FX involves a high degree of risk including the risk of loss of the Customer s entire Risk Capital deposited with PTFX. Losses, in some cases, have the potential to extend beyond the Customer s Account Value. In consideration of PTFX agreeing to enter into FX Contracts with its Customer(s) for this Account, PTFX requires all the undersigned Customer(s) to analyze their financial objectives, financial status, investment constraints and tax situation to determine whether FX trading is suitable. In addition, we require our Customers to carefully read and acknowledge the PTFX Risk Disclosure Statement that outlines without limitation the risks associated with trading margined FX through PTFX. 2. OTC Margined FX Trading involves a high amount of risk and is highly speculative. Customer(s) agrees that they are in full understanding and willing to assume the legal, economic, and other risks associated with the trading in margined FX, and are willing and able to assume the loss of their entire Risk Capital, defined as those funds, that if lost, would not change your lifestyle or your family's lifestyle. As such, they further agree that margined FX trading is not suitable for Retirement Funds. PTFX encourages Customers to closely manage outstanding open positions and to use prudent money management precautions such as, but not limited to, Stop Loss Orders. 3. Excessive leverage available with Margined FX can lead to quick losses. Customer(s) agrees that using a high degree of leverage, defined as the use of a small amount of capital to control a larger amount of an Open Position, can result in large losses due to a price change(s) of open Foreign Currency Contract(s) with PTFX. PTFX provides leverage on most Currency Pairs for most customers of 100:1. With 100:1 leverage the Customer has the potential to control 1,000,000 unit position with 10,000 units notional value in an Account. PTFX encourages its Customers to use only that portion of leverage that the Customer is most comfortable with and to use money management precautions such as, but not limited to, Stop Loss Orders for the purpose of limiting risk. PTFX reserves, at its sole discretion, the right to reduce or increase the amount of leverage given on any Currency Pair at any time and without notice. 4. FX trading experience periods of liquidity risk. Customer acknowledges that Liquidity Risk, resulting from decreased liquidity of a currency pair, is usually due to unanticipated changes in economic and/or political conditions. Customer also acknowledges that Liquidity Risk can affect the general market in that all participants experience the same lack of buyers and/or sellers. The Customer also understands that liquidity risk can be PTFX specific due to changes in liquidity available to PTFX from an PTFX Custodian of funds interbank liquidity providers or specific to retail FX market makers due to a perception that the risks of the market segment has increased. When liquidity decreases, Customers can expect, at the minimum, to have wider bid to ask spreads as the supply of available bid/ask prices, outstrips the demand. Decreases in liquidity can also result in "Fast Market" conditions where the price of a currency pair moves sharply higher or lower or in a volatile up/down pattern without trading in an ordinary step-like fashion. In some instances, there may exist the possibility that a trading bid and/or ask price for a FX pair or pairs are not available (a situation where there is no liquidity). Although there may be instances when the aggregate OTC FX market enters a "Fast Market" situation or periods where liquidity is in short or no supply, it is important to note that, PTFX prices, bid/ask spreads and liquidity will reflect the prevailing interbank market liquidity for PTFX. PTFX can Liquidate Positions of the Customer that do not have adequate margin: Because of the leverage available with OTC Margined FX Trading and the potential for extreme volatility, an PTFX Custodian of funds reserves the sole discretionary right to liquidate Customer s Account(s) should the Margin in the Account not be sufficient to cover the potential risk of loss. PTFX graphically shows the Customer s Liquidation Level on the Customers PTFX Margin Monitor. Should the Customer s Account value go below the free of programming bugs that can cause trading, position keeping or any other required functionality of the Trading Platform and other relevant software applications associated with PTFX including but limited to clearing, market making and escrow Account software, from becoming inoperable or without errors. 5. There is a Communication Risk that the Customer assumes. Although PTFX will have qualified representatives available on the telephone during business hours, a representative may become unavailable due to communication or other malfunction, or high call volume. The Customer acknowledges and agrees that

2 they will hold harmless PTFX for any loss or missed trading opportunity resulting from any communication problems the Customer may encounter. 6. PTFX does not take responsibility for Money Managers. Should a Customer grant a Money Manager trading discretionary trading authority or control over a Customer s Account, the Customer acknowledges that PTFX does not take any responsibility for any action done by that Third Party on the Customer s behalf. The Customer grants Money Manager trading authority for the Customer s Account at it sole and full risk. PTFX reserves the right to correct any transactions executed on misquoting errors: In the case when a quoting error occurs that results in a Customer transaction done at an off-market price, PTFX reserves the sole discretionary right to make the necessary corrections and adjustments to the Customer s Account whether it be in the favor of the Customer or not in the Customer s favor. Any change will be reported to the Customer either verbally or via an electronic method such as but not limited to All Market Recommendations made by PTFX or any representative of PTFX are for informational purposes only. Any decision by the Customer to buy or sell a foreign currency pair is an independent decision by the Customer. Market recommendations made by PTFX or a representative of PTFX do not constitute an offer to sell or buy any Foreign Currency pair from PTFX or from any other source that may provide straight-through processing prices to the Customer. PTFX and its employees are not investment advisor(s) and have no fiduciary duty to Customer and therefore is not liable for any losses incurred by the Customer as a result of information or any recommendations made by PTFX or representative of PTFX. Customer is at Risk if PTFX should go out of business. There is no guarantee that PTFX as a business will be profitable. Consequently, there exists a credit risk that PTFX may be subject to losses, which could, in turn, jeopardize the capital that the Customers have in their Accounts. Customer acknowledges that in the event of insolvency, the Customer can only look to PTFX for performance and return of all Collateral and Margin that the Customer may have at PTFX. 8. PTFX may decide to exit the FX Business. As a result, the Customer agrees and acknowledges that PTFX may liquidate all Customer positions, and return margined funds to the Customer at the sole discretion of PTFX, at any time and for any reason. PTFX Customers do not hold PTFX liable for any loss as a result of liquidation of the Customers position either on an actual basis or as a result of missed profit opportunities 9. Customers are responsible for any reporting errors. Any reporting and confirmation errors of omission, and/or errors in details of transactions including but not limited to the price contracts were executed, the currency pair traded, the market direction (i.e., buy or sell ) of order, the type of order and/or any errors in fees, charges or credits to the Customer s Account including but not limited to charges for executing a transaction, wiring funds, rolling over position, and sweeping foreign currency balances into the home currency, require that the customer notify PTFX immediately upon discovery for review. In addition, the Customer is responsible to submit any errors in writing to PTFX and send the complete details to Attn: Prime Trade FX, Ltd., Talstrasse 20, 8001 Zurich, Switzerland. Notice shall be deemed received only if actually delivered or mailed by registered mail to, return receipt requested. 10. Risks from trades done using chat communication devices. PTFX may utilize an electronic conversational application or other similar chat application for the communication and execution of some market orders. Trades done using chat applications or the telephone should only be done if the Customer cannot execute using the Trading Platform. Although currently not planned, PTFX reserves the right to charge a commission for trades done over chat applications. Should PTFX charge a commission for chat application trades, it will be reported on the PTFX Website and be reflected as a line item debit in your PTFX Account Reports. All trades and charges done via chat applications are final. Neither PTFX nor third party chat application provider is responsible or liable if the electronic logs of the electronic conversations are erased or never recorded because of error, omission or any reason. PTFX is also not liable should User Name, Password and Account information be obtained knowingly or unknowingly by a Third Party and as a result, trades done in the name of the Customer without his or her knowledge or authorization. 11. PTFX has limited liability. The Customer agrees and acknowledges that PTFX shall not be liable to the Customer for any claims, losses, damages, costs or expenses, including attorneys fees caused directly or indirectly by any events, actions or omissions, without

3 limitation, claims, losses, damages, costs and expenses, including attorney s fees, resulting from civil unrest, war, insurrection, international intervention, governmental action) including, without limits, exchange controls, forfeitures, devaluations and nationalizations), natural disasters, acts of God, market conditions, communication problems or any delay, disruption, failure of any transmission or communication system or computer hardware or software application whether supplied and belonging to PTFX or from a third party vendor that the Customer and PTFX relies on to conduct execution and reporting services. 12. Effect of "Leverage" or "Gearing". FX contracts carry a high degree of risk. The amount of initial margin is small relative to the value of the FX contract so that transactions are leveraged or geared. A relatively small market movement may have a proportionately larger impact on the funds Customer has deposited or will have to deposit. This may work against Customer as well as for Customer. Customer may sustain a total loss of initial margin funds and any additional funds deposited with the firm to maintain Customer s position. 13. Risk-reducing orders or strategies. Placing contingent orders, such as stop-loss or limit orders, particularly in volatile market conditions, will not necessarily limit Customer s losses to the intended amounts, since market conditions may make it impossible to execute such orders. Strategies using combinations of positions, such as spread and straddle positions may be as risky as taking simple long or short positions. 14. Charges. Before Customer begins to trade, Customer should obtain a clear understanding of all charges for which Customer may be liable. These charges will affect Customer s net profit (if any) or increase Customer s loss. 15. Electronic trading. Trading on an electronic trading system may differ not only from trading in an openoutcry market but also from trading on other electronic trading systems. If Customer undertakes transactions on an electronic trading system, Customer will be exposed to risks associated with the system including any failure of hardware and software. The result of any system failure may be that Customer s order is either not executed according to Customer s instructions or not executed at all. Since PTFX does not control signal power, its reception or routing via Internet, configuration of Customer s equipment or reliability of its connection, PTFX cannot be responsible for communication failures, distortions or delays when trading on-line (via Internet). In no event shall PTFX be liable for speculative or expectancy damages for potential future lost profits. 16. Limitation of liability. Customer accepts any trading system provided by PTFX "as is," and without warranties, express or implied, including, but not limited to, the implied warranties of merchantability or fitness for a particular use, purpose or application; timeliness; freedom from interruption; or any implied warranties arising from trade usage, course of trading or course of performance. Under no circumstances shall PTFX be liable for any punitive, indirect, incidental, special or consequential loss or damages, including loss of business, profits or goodwill. PTFX shall not be liable to Customer by reason of delays or interruptions of service or transmissions, or failures of performance of PTFX s or its affiliate systems, regardless of cause, including, but not limited to, those caused by hardware or software malfunction; regulatory action; acts of god; war, terrorism, or our intentional acts. Customer recognizes that there may be delays or interruptions in the use of our system, including, for example, those caused intentionally by PTFX for purposes of servicing the system. PTFX does not guarantee that alternative trading arrangements will be available at a particular time and PTFX will not be held liable for delays in entering an order. 17. Margin. PTFX s margin policies require that Customer s Account is properly margined at all times. Failure to meet margin requirements may result in the liquidation of any open positions with a resultant loss. PTFX reserves the right to liquidate all positions without notice if an Account falls below Customer s minimum margin requirement, in accordance with PTFX s margin call policy. 18. Quoting errors. Should quoting errors occur, which may include, but are not limited to, a mistype of a quote by PTFX, a quote which is not representative of fair market prices, an erroneous price quote from a PTFX employee, such as but not limited to a wrong big figure quote or an erroneous quote due to failure of hardware, software or communication lines or systems and/or inaccurate external data feeds provided by third-party vendors, PTFX will not be liable for the resulting errors in Account balances. The foregoing list is not meant to be exhaustive and in the event of a quoting error, PTFX

4 reserves the right to make the necessary corrections or adjustments on the Account involved. In the event of a system error where interest is not charged or credited as scheduled, PTFX reserves the right to apply the missed interest to the Account at any time. 19. Third-Party Authority. In the event that Customer grants trading authority or control over Customer s Account to a third-party trading advisor, such as a Money Manager, whether on a discretionary or nondiscretionary basis, PTFX shall in no way be responsible for reviewing Customer s choice of such trading advisor, or for making any recommendations with respect thereto. PTFX makes no representations or warranties concerning any trading advisor; PTFX shall not be responsible for any loss to Customer occasioned by the actions of the trading advisor; and PTFX does not, by implication or otherwise, endorse or approve of the operating methods of any trading advisor. If Customer gives a Money Manager authority to does so at Customer s own risk. Customer should regularly review the activity in Customer s Account to ensure that Customer approves of the transactions placed on Customer s behalf by Customer s Money Manager. 20. Disclosure Regarding Bankruptcy Protections. The transactions Customer is entering into with PTFX are not traded on an exchange. Therefore, Customer s funds may not receive the same protections as funds used to margin or guarantee exchange-traded futures and options contracts, which receive a priority in bankruptcy. Since that same priority has not been given to funds used for off-exchange Forex trading, if PTFX becomes insolvent and Customer has a claim for amounts deposited or profits earned on transactions with PTFX, Customer s claim may not receive a priority. Without a priority, Customer is a general creditor and Customer s claim will be paid, along with the claims of other general creditors, from any monies still available after priority claims are paid. Even customer funds that PTFX keeps separate from its own operating funds may not be safe from the claims of other general and priority creditors. 21. Volatile Market Conditions. Trading at times of extraordinarily volatile market conditions, e.g. key news announcements may expose the Customer to additional risks, including the risk that the Customer may not get the price him or her requests. PTFX cannot and does not guarantee its prices in times of extraordinary market volatility. 22. Simulated Conditions. Simulated conditions may differ from real conditions. Therefore, Customers who trade on demo Accounts should not necessarily expect the same results from live trading. 23. Referring Parties. IF YOU WERE REFERRED TO PTFX BY AN INTRODUCING BROKER, REFERRING PARTY OR THIRD PARTY ADVISOR (EACH, AN IB ), PLEASE BE ADVISED THAT PTFX AND YOUR IB ARE WHOLLY SEPARATE AND INDEPENDENT FROM ONE ANOTHER AND THERE EXISTS NO JOINT VENTURE OR PARTNERSHIP RELATIONSHIP BETWEEN THE PARTIES. ADDITIONALLY, NEITHER IB NOR ANY OTHER EMPLOYEE OR AGENT OF IB IS AN AGENT OR EMPLOYEE OF PTFX. a. PTFX does not control, and cannot endorse or vouch for the accuracy or completeness of any information or advice Customer may have received or may receive in the future from Customer s IB or from any other person not employed by PTFX regarding Forex trading or the risks involved in such trading. b. PTFX provides risk disclosure information to all new Customers when they open Accounts. Customer should read that information carefully, and should not rely on any information to the contrary from any other source. c. Customer acknowledges that no promises have been made by PTFX or any individual associated with PTFX regarding future profits or losses in Customer's Account. Customer understands that Forex trading is very risky, and that many people lose money trading. d. If an IB or any other third party provides Customer with information or advice regarding Forex trading, PTFX shall in no way be responsible for any loss to Customer resulting from Customer's use of such information or advice. e. To the extent Customer has previously been led to believe or believes that utilizing any third party trading system, course, program, research or recommendations provided by IB or any other third party will result in trading profits, Customer hereby acknowledges, agrees and understands that all Forex trading, including trading done pursuant to a system, course, program, research or recommendations of IB or another third party involves a substantial risk of loss. In addition, Customer hereby acknowledges, agrees and understands that the use of a

5 trading system, course, program, research or recommendations of IB or another third party will not necessarily result in profits, or will avoid losses or limit losses. f. Because the risk factor is high in foreign currency trading, only genuine risk capital should be used in such trading. If Customer does not have capital which the Customer can afford to lose, Customer should not trade in the foreign currency markets. g. Customer understands and acknowledges that PTFX may compensate Customer s IB for introducing Customer to PTFX and that such compensation may be on a per-trade basis or other basis. h. Customer understands and agrees that if Customer's Account with PTFX is introduced by an IB, that IB shall have limited access to information regarding Customer s PTFX Account, but the IB shall not have the right to enter into any trades on Customer's PTFX Account unless authorized by Customer under a power of attorney between Customer and IB granting such IB the right to trade on Customer's Account. i. Customer understands and acknowledges that Customer may have only one IB, a party that originally referred Customer to PTFX. j. Customer may terminate Customer s relationship with an IB by providing written notice to PTFX. Customer understands and acknowledges that Customer cannot be considered the client of any other IB. Should you have any questions regarding the risks of trading in foreign currency; please contact your Account representative.